Defending its decision to raise net worth requirement for asset management companies, whole time member of Sebi, S Raman today said high net worth is essential for better penetration of mutual fund industry as players need financial muscle to support growth.

He also said there is less scope for the regulator to have a rethink on this issue.

"We have done what we have done after a great deal of thought...Right now, there is not much scope for rethink...," S Raman told reporters on the sidelines of a BSE event here.

The whole-time member of the market regulator, who attended the launch of BSE Star MF platform for distributors this afternoon, also said, "Worldwide, for any financial activity, financial strength is a great strength to an organisation. We think, Rs 10 crore is too small an amount and this amount has been fixed several years ago. Even if you adjust it with inflation, it will be around Rs 30 crore now."

Sebi in its last board meet raised the minimum capital requirement for setting up a mutual fund house to Rs 50 crore from the existing Rs 10 crore.

This has created a discomfort within small mutual fund houses in the industry which now have to raise their capital to comply with the new rule.

S Raman said contrary to the argument that small funds perform better, the regulator has found out that schemes of bigger fund houses are performing better with some exceptions.

"Contrary to what some people are saying that small funds are more efficient, we find that funds of bigger mutual funds really performed better....," he said, adding this phenomena is not universal.

Observing that sound financial strength is required for greater penetration of the industry, S Raman said, "As the industry grows, specially in finance, capital is important.

"There is also a need to go beyond T-15 cities if we are talking of penetration. Today, around 87 per cent of mutual fund AUM is concentrated in top 15 centres. (If we want larger penetration), it needs some amount of expenditure...all this requires capital...," he added,

Referring to the issue of dip in retail investors in mutual fund space, he said this a matter of concern and the fund houses should think about it.

S Raman also said the regulator has taken up issues like additional tax concession of Rs 50,000 for investors who invest in pension products through mutual fund route and pleading for higher income tax cap with the government to facilitate more savings into MF products.

On the tax treatment given to FMPs, S Raman said the industry should prepare itself for future decisions on tax front.